Christopher Brookins is the founder of Valiendero Digital Assets, a quantitative crypto fund founded out of Carnegie Mellon.
2019 has not only seen a resurgence of the crypto bull, but also capital raising.
In particular, IEOs or “initial exchange offerings” have been highly visible for both good and bad reasons. Positively, IEOs have produced large returns to-date. Negatively, to quote Jeff Dorman at Arca, “Many argue (correctly) that IEOs are illegal (in the US) since the tokens are clearly securities, & unregulated exchanges are acting as broker/dealers. Thus, U.S. investors can’t participate.”
However, despite legality issues for US investors, many global participants are still actively investing in these offerings due to their return potential.
So, what is driving prices?
New and small-cap (less than $100 million in market cap) digital assets are highly reflexive and driven by two key variables, exchange volume (ExVol) and market cap (MCAP). The logic being that the greater the buying volume in relation to the asset’s overall market cap, the greater the potency of its reflexivity cycle (see below).
The aforementioned speculative demand can be quantified by the ratio of ExVol to MCAP, which may offer investors a better tool to gauge risk and reward in these speculative assets.
The chart below displays the correlation of the speculative demand ratio (ExVol to MCAP) in the price of several IEOs. The chart is broken down into distinct time periods, which shows the efficacy of the ratio as the asset matures, e.g. first 60 days, first 180 days, first 360 days, and historical (since inception).
Please note, reliable MCAP data for newer IEOs like MATIC, FET, and CELR does not span 60 days, thus only historical is calculated.
*blocktap.io, coinmetrics.io, and coinmarketcap.com
This time, the chart below displays the correlation of the speculative demand ratio (ExVol to MCAP) toin price of several small-cap assets as a way to generalize the ratio to all new issuances, not just IEOs in 2019.
*blocktap.io, coinmetrics.io, and coinmarketcap.com
As the aforementioned charts illustrate, the speculative demand ratio is a highly valuable signal for investors looking at IEOs or new digital assets, especially during the first 180 days of existence.
Post-180 days, the ratio is still useful for price prediction, but its signal diminishes. Presumably, as an asset matures, fundamentals influence price more, e.g. bitcoin’s historical correlation to in price is only 0.02.
However, for newer IEOs like MATIC, CELR, and FET, the correlation of the speculative demand ratio is likely to rise over the coming months. Thus, current or potential investors should closely monitor the ratio’s trend as a directional gauge of risk and reward.
For more information on IEOs, watch CoinDesk’s explainer video below:
Disclaimer: this article is for educational purposes only and should not be considered investment or trading advice.
The author holds bitcoin and ether at the time of writing.
Opera’s Browser With Built-In Crypto Wallet Launches for iPhones
Users of Android phones and desktop computers have had the option to use Opera’s blockchain-friendly browser for months now, but iPhone owners have been left out of the fun.
That’s now changed with the launch of the latest version of Opera Touch for iOS.
As per a blog post from the firm, the new browser option is largely identical to the above-mentioned offerings, providing a built-in cryptocurrency wallet and the ability to run Web 3.0 and decentralized apps (dapps) without a third-party plugin.
“We believe that the Web of today will be the interface to the decentralized web of tomorrow (Web 3). With built-in Crypto Wallet, the browser has the potential to renew and extend its important role as a tool to access information, make transactions online and manage users’ online identities in a way that gives them more control.”
The wallet currently allows users to hold, transact and make payments in ethereum and all ERC-20 standard tokens and stablecoins, as well as collectibles such as CryptoKitties via the ERC-721 standard.
The Opera website says the wallet can automatically detect and list any ERC-20 tokens used in ethereum dapps, such as in-game currencies.
Dapps can be accessed by typing their address directly in the browser, avoiding the need to use third-party extensions
In order to start using dapps, users will need to purchase ethereum (ETH) and store it in the Opera wallet. Once there, a selection of dapps will be listed in the store in the app, the post says.
JPMorgan to Start Customer Trials of Its ‘JPM Coin’ Crypto
JPMorgan Chase is to start trials of its “JPM Coin” cryptocurrency in conjunction with corporate clients.
According to a report from Bloomberg Japan on Tuesday, Umar Farooq, the investment bank’s head of digital treasury services and blockchain, said that customers would trial the technology with the ultimate aim of speeding up transactions, such as payments between firms and bond transactions.
The trials are being conducted on the assumption regulatory permission will ultimately be granted, according to Bloomberg.
First revealed in February, JPM Coin initially runs on top of Quorum, a private version of ethereum developed by the bank.
JPM Coin will function as a stablecoin, with fiat cash being deposited at the bank in exchange for the token, which can then be transferred via a permissioned distributed ledger. The recipient can later redeem the token for cash from JPMorgan.
Initially linked to the U.S. dollar, the coin is expected to be extended to other fiat currencies in time. Real-world trials were expected in “a few months,” according to a report at the time.
Discussing JPM Coin’s state of development, Farooq told Bloomberg in today’s report: “The technology is very good, but it takes time in terms of licensing and approval. It must be explained.”
As well as inter-firm remittances, he said that the cryptocurrency could be used to settle bonds and commodities transactions. Clients in regions including Europe, the US and Japan have already shown interest, according to Farooq. He would not name any companies involved in the upcoming trials, the report states.
Russia May Allow Crypto Trading in Upcoming Legislation: Official
As Russia’s cryptocurrency bill slowly inches forward, a government official has hinted at what may lie ahead when the legislation is finally passed.
According to a report from local news source Interfax.ru, Deputy Finance Minister Alexei Moiseyev told journalists on Friday that among the options currently being discussed is to allow the buying and selling of cryptocurrencies. Crypto payments are not on the table, however.
Worryingly for the country’s crypto community, the bill could still see cryptocurrency use banned outright.
Moiseyev said that the finance ministry had met with the Russian central bank and the Federal Security Service, the nation’s security agency, to discuss the bill.
“There is a range [of possibilities] from prohibition to the possibility of purchase,” he explained. “Like with foreign currency, it would be possible to buy and sell [cryptocurrencies], but impossible to use them for payments. After a political decision is made on this issue, we will have the responsibility.”
Russia’s bill on digital financial assets was expected to be considered at the plenary session of the State Duma on March 19, but was postponed.
According to the report, Anatoly Aksakov, head of the Duma Financial Market Committee, has said that Russia must adopt a bill on cryptocurrency before the end of this year in order to comply with recommendations from international watchdog, the Financial Action Task Force (FATF).
In related news, FATF announced new standards on Friday that include a controversial requirement that “virtual asset service providers,” including crypto exchanges, pass information about their customers to one another when transferring funds between firms. Its 37 member nations are not obliged to apply its guidance, but non complying countries can be blacklisted, which would be harmful financially.